Managed futures strategies have faced significant challenges this year, hindered by a declining dollar and unpredictable U.S. trade policies, among other factors. Despite these hurdles, advisors should refrain from hastily dismissing these alternative investments. In fact, this sector may be on the verge of a resurgence.
If a rebound occurs, the Unlimited HFMF Managed Futures ETF (HFMF)—one of the latest entrants in the managed futures ETF market—could emerge as a leader. Launched in July, this actively managed ETF is designed for those new to alternative investments. It’s crucial to understand that managed futures should be evaluated over extended holding periods rather than just a few weeks or months.
According to Morningstar analyst Janet Rohr, the recent underperformance of managed futures can test investors’ patience. She notes, “It may be helpful to remember how these strategies operate and why their value is best measured over longer horizons.”
HFMF for the Win
The HFMF ETF is likely to attract a diverse range of investors. Many market participants recognize that managed futures provide diversification benefits and can help mitigate volatility in equity-heavy portfolios. However, constructing a basket of managed futures can be challenging for individual investors. Additionally, older versions of these funds often come with complex structures and high fees.
Rohr explains, “Trend-following strategies typically use futures markets to capitalize on trends across the global economy. These highly liquid futures markets allow managers to swiftly enter and exit positions in commodities, currencies, and stock indexes.”
Currently, HFMF holds a variety of assets, including equity and fixed income derivatives, as well as commodity and currency futures. Many retail investors lack expertise in these areas and may not even know how to access them. HFMF simplifies this process, making a strategy once reserved for professionals and affluent investors accessible to the general public.
This accessibility is significant, as many so-called “ordinary” market participants understand the advantages of diversification. They are increasingly aware that correlations between stocks and other traditional asset classes have risen in recent years. Ultimately, while HFMF offers numerous benefits, investors should exercise patience with this new ETF.
Rohr emphasizes, “Attempting to predict when these models will outperform is difficult and often counterproductive. Instead, their real strength emerges when held as a persistent allocation within a diversified portfolio. These strategies may not always shine, but their role as a diversifier makes them a valuable complement to more traditional holdings.”
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